EC 302 Test #1 Practice Questions With
Correct Answers
Which ||of ||the ||following ||will ||be ||counted ||as ||an ||expenditure ||in ||the ||measurement ||of ||GDP?
||(Assume ||that ||none ||of ||the ||transactions ||is ||concealed ||from ||the ||relevant ||authorities). ||- ||
CORRECT ||ANSWER✔✔-purchase, ||using ||food ||stamps, ||of ||a ||loaf ||of ||bread
All ||income, ||production, ||and ||expenditure ||variables ||that ||are ||measured ||at ||current ||market ||
prices ||are ||referred ||to ||as ||___________. ||- ||CORRECT ||ANSWER✔✔-nominal ||variables
To ||compute ||the ||CPI, ||the ||Bureau ||of ||Labor ||Statistics ||(BLS) ||compiles ||a ||"basket ||of ||goods" ||
that ||____________; ||each ||price ||in ||the ||index ||is ||weighted ||by ||___________. ||- ||CORRECT ||
ANSWER✔✔-the ||average ||urban ||consumer ||buys; ||the ||quantity ||of ||the ||good ||that ||goes ||into
||the ||basket
Assume ||that ||a ||high ||proportion ||of ||recent ||college ||graduates ||decides ||to ||go ||back ||to ||school
||seeking ||advanced ||degrees, ||rather ||than ||confront ||the ||challenge ||of ||landing ||a ||good ||job ||in ||
the ||midst ||of ||generally ||high ||unemployment. ||What ||is ||the ||direct ||impact ||of ||this ||behavior ||
on ||(a) ||the ||labor ||force ||participation ||rate, ||(b) ||the ||unemployment? ||- ||CORRECT ||
ANSWER✔✔-a) ||the ||labor ||force ||participation ||rate ||will ||go ||down
b) ||the ||unemployment ||rate ||will ||go ||down
Consider ||the ||following ||production ||function: ||Y= ||F(K,L) ||= ||A(3K+4L). ||Does ||this ||production ||
function ||exhibit ||constant ||returns ||to ||scale? ||- ||CORRECT ||ANSWER✔✔-Yes
Suppose ||that ||an ||economy ||has ||output ||Y=AK^0.3L^0.7, ||that ||Y ||equals ||$12 ||trillion, ||capital ||K
||is ||$27 ||trillion, ||and ||labor ||L ||is ||64 ||million ||workers. ||Given ||this ||information, ||what ||i ||the ||
closest ||approximation ||of ||total ||factor ||productivity ||A? ||- ||CORRECT ||ANSWER✔✔-around ||0.25
Correct Answers
Which ||of ||the ||following ||will ||be ||counted ||as ||an ||expenditure ||in ||the ||measurement ||of ||GDP?
||(Assume ||that ||none ||of ||the ||transactions ||is ||concealed ||from ||the ||relevant ||authorities). ||- ||
CORRECT ||ANSWER✔✔-purchase, ||using ||food ||stamps, ||of ||a ||loaf ||of ||bread
All ||income, ||production, ||and ||expenditure ||variables ||that ||are ||measured ||at ||current ||market ||
prices ||are ||referred ||to ||as ||___________. ||- ||CORRECT ||ANSWER✔✔-nominal ||variables
To ||compute ||the ||CPI, ||the ||Bureau ||of ||Labor ||Statistics ||(BLS) ||compiles ||a ||"basket ||of ||goods" ||
that ||____________; ||each ||price ||in ||the ||index ||is ||weighted ||by ||___________. ||- ||CORRECT ||
ANSWER✔✔-the ||average ||urban ||consumer ||buys; ||the ||quantity ||of ||the ||good ||that ||goes ||into
||the ||basket
Assume ||that ||a ||high ||proportion ||of ||recent ||college ||graduates ||decides ||to ||go ||back ||to ||school
||seeking ||advanced ||degrees, ||rather ||than ||confront ||the ||challenge ||of ||landing ||a ||good ||job ||in ||
the ||midst ||of ||generally ||high ||unemployment. ||What ||is ||the ||direct ||impact ||of ||this ||behavior ||
on ||(a) ||the ||labor ||force ||participation ||rate, ||(b) ||the ||unemployment? ||- ||CORRECT ||
ANSWER✔✔-a) ||the ||labor ||force ||participation ||rate ||will ||go ||down
b) ||the ||unemployment ||rate ||will ||go ||down
Consider ||the ||following ||production ||function: ||Y= ||F(K,L) ||= ||A(3K+4L). ||Does ||this ||production ||
function ||exhibit ||constant ||returns ||to ||scale? ||- ||CORRECT ||ANSWER✔✔-Yes
Suppose ||that ||an ||economy ||has ||output ||Y=AK^0.3L^0.7, ||that ||Y ||equals ||$12 ||trillion, ||capital ||K
||is ||$27 ||trillion, ||and ||labor ||L ||is ||64 ||million ||workers. ||Given ||this ||information, ||what ||i ||the ||
closest ||approximation ||of ||total ||factor ||productivity ||A? ||- ||CORRECT ||ANSWER✔✔-around ||0.25
